Trump’s First Inflation Report Could Influence Rate Cut Prospects, Crypto Markets
A slowdown in inflation may increase the likelihood of interest-rate cuts, potentially benefiting riskier assets like cryptocurrencies.
The upcoming Consumer Price Index (CPI) report, set for release on Wednesday, will be the first under President Donald Trump’s administration. A softer inflation reading could strengthen the case for rate cuts, offering relief to risk-asset investors who have faced significant losses in recent weeks.
Economists expect the Bureau of Labor Statistics to report that headline inflation declined slightly to 2.9% year-over-year from 3%, while core inflation—which excludes food and energy—eased to 3.2% from 3.3%.
A deceleration in inflation often boosts the odds of lower interest rates, making higher-risk investments more appealing. The CPI, which tracks the cost of a broad basket of goods and services, had been rising for four consecutive months before this expected slowdown.
In the past few weeks, the S&P 500 has tumbled nearly 10% from its record high, while Bitcoin (BTC) has slumped roughly 30%, currently hovering around $80,000.
President Trump and Treasury Secretary Scott Bessent have emphasized the need to bring down 10-year Treasury yields to help reduce the federal funds rate. This approach seems to be gaining traction, with the 10-year yield dropping to 4.2% from 4.8%, the U.S. Dollar Index (DXY) slipping below 104, and WTI crude oil stabilizing around the mid-$60 range—aligning with the administration’s broader economic strategy.
Meanwhile, the Truflation Index has fallen to 1.35%, its lowest level since September 2020. However, long-term inflation expectations remain above 2%, signaling that managing inflation remains a key challenge for the Trump administration.
At the upcoming Federal Open Market Committee (FOMC) meeting on March 18-19, Chair Jerome Powell is expected to keep the federal funds rate unchanged at 4.25%-4.50%, according to the CME FedWatch Tool.
Market participants will be closely monitoring the CPI report, as a lower-than-expected inflation print could push the Federal Reserve toward potential rate cuts. Conversely, if inflation remains stubbornly high, policymakers may be forced to keep rates elevated, prolonging pressure on risk assets.
